LG Innotek "The Top Contributor to Performance Improvement is the Substrate Materials Business"

Chul-dong Jeong, CEO of LG Innotek

[Asia Economy Reporter Changhwan Lee] LG Innotek announced on the 11th that its substrate materials business is playing a hidden role in improving the company's performance.

LG Innotek recorded sales of 2.01 trillion KRW and an operating profit of 138 billion KRW in the first quarter of this year. Despite the seasonal off-season and the spread of COVID-19, sales increased by 46.9% compared to the same period last year, and operating profit turned positive.

Among these, the substrate materials business recorded sales of 289.7 billion KRW, up 13% from the same period last year. It is analyzed that sales expansion was driven by increased sales of semiconductor substrates used in 5G communication chips and tape substrates applied to high-resolution display devices.

Industry insiders point to the strong performance of the substrate materials business as the reason LG Innotek succeeded in turning a profit in the first quarter. It is analyzed that the substrate materials business continues its strong performance through business efficiency, productivity innovation, and structural improvement based on globally leading products.

The substrate materials business was able to establish itself as a profitable business largely due to its globally top-ranked products such as RF-SiP (Radio Frequency-System in Package), tape substrates, and photomasks.

RF-SiP, a semiconductor substrate for mobile and Internet of Things (IoT) communications, is a component that connects communication chips and APs (Application Processors) in smartphones and wearable devices to the main board to transmit electrical signals. This product held a 32% share of the global market last year and has maintained the global number one position since 2018.

RF-SiP is a high-value-added product optimized for the ultra-slim, high-performance, and large-capacity trends of mobile and IoT devices. It has led the growth of the substrate materials business with an average annual sales growth of about 40%.

In particular, with the spread of 5G and foldable phones and the increase in semiconductor memory capacity, demand for cutting-edge semiconductor substrates is expected to continue expanding.

Tape substrates are thin tape-shaped components that connect display panels and main boards to transmit electrical signals. They held a 40% share of the global market last year and have maintained the global number one position since 2009.

Photomasks are masks engraved with fine circuits used to expose light onto panels to etch circuits. This product also held a 33% share of the global market last year, surpassing Japanese companies and maintaining the global number one position since 2000.

Both products are core components for displays, optimized for high resolution, ultra-slimness, and thin bezels. Especially, as the application of OLED, which is attracting attention as the next-generation display, expands, demand for these components is increasing annually.

The industry expects LG Innotek's substrate materials business to continue its strong momentum for the time being.

The semiconductor substrates for communications have secured proprietary high-integration and fine circuit technologies, significantly widening the technological gap with competitors. Additionally, tape substrates face ongoing supply shortages due to the limited number of companies with core technologies. Photomasks also require large-scale facility investments and high technological capabilities, making them products with high entry barriers.

To streamline the substrate materials business, LG Innotek withdrew from the mobile HDI (High Density Interconnection) printed circuit board business in November last year. The HDI business was a sector that continued to incur losses due to market growth slowdown and low-price competition from Chinese companies.

LG Innotek reorganized its business portfolio to focus on businesses capable of growth and profit generation by transferring personnel and facilities from the HDI business to the semiconductor substrate business.

At the same time, it is accelerating production innovation activities. For semiconductor substrates, new processes and materials have been applied to reduce product processing time and maximize production volume per unit time. Various innovation activities, such as introducing new systems to minimize defect rates, are continuously improving productivity.

For tape substrates, LG Innotek has actively promoted the development of proprietary adhesion technology, process speed improvement through equipment optimization, and product transportation process improvements, raising daily production volume to the industry's highest level. Photomasks have also shortened production lead times by internalizing core processes.

This content was produced with the assistance of AI translation services.